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NZ dollar holds above 76 cents as credit rating threat looms over Europe

Monday 19th December 2011

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The New Zealand dollar held above 75 US cents after Fitch Ratings lowered France’s rating outlook to negative and put six other European nations on review, citing Europe’s failure to find a “comprehensive solution” to the debt crisis.  

The kiwi dollar was little changed at 76.10 US cents just after 8am, from 76.02 cents in late New York trading on Friday. The trade weighted index increased to 68.32 from 68.21.

Fitch affirmed France’s AAA rating and placed Spain, Italy, Belgium, Slovenia, Ireland and Cyprus on a “Rating Watch Negative” review, which it expects to complete by the end of January. Separately, Belgium’s credit rating was cut two levels to Aa3 by Moody’s Investors Service. The ratings action suggests financial markets will again be dominated by concern Europe’s woes are undermining global growth.

“The kiwi will be lead by the euro again this week,” said Tim Kelleher, head of foreign exchange at ASB Institutional. “The markets will be pretty trim in the lead up to Christmas, so any news is going to make the markets move further than we expect.”

The Guardian newspaper reported that Standard & Poor’s is threatening to downgrade France in coming days after it placed the ratings of 15 euro nations on review, including the region’s six AAA rated countries last week.

It is a big week for New Zealand data, with the balance of payments for the third quarter due out on Wednesday and gross domestic product on Thursday. The market is expecting GDP rose 0.6 percent in the third quarter after eking out a gain of just 0.1 percent three months earlier, according to a Reuters survey of 14 economists.

The kiwi dollar rose to 76.23 Australian cents from 76.13 on Friday and 59.17 yen from 59.12 yen. It rose slightly to 48.97 British Pence from 48.95 pence and 58.38 euro cents from 58.31 cents.


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